US anti-fraud law doesn’t cover foreign commercial bribery schemes, judge rules in FIFA case

US anti-fraud law doesn’t cover foreign commercial bribery schemes, judge rules in FIFA case

8 September 2023
By Samuel Rubenfeld

There is no precedent to support the application of a US anti-fraud law to cover foreign commercial bribery schemes, based on requirements set out in a recent Supreme Court decision, a federal judge ruled in a closely watched sports corruption case.

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There is no precedent to support the application of a US anti-fraud law to cover foreign commercial bribery schemes, based on requirements set out in a recent Supreme Court decision, a federal judge ruled in a closely watched sports corruption case.

The decision last week from US Judge Pamela Chen vacated the convictions of Hernan Lopez, a former 21st Century Fox executive, and sports marketing company Full Play Group.

In a footnote, Chen also ruled it was “premature” to opine on the decision’s effects on other defendants in the broader case who previously pleaded guilty or who have been convicted under the law. Prosecutors have secured more than two dozen individual guilty pleas, four corporate pleas and other settlements in the case, which alleged a decades-long racketeering conspiracy to corrupt the world’s most popular sport.

A spokesman for the US attorney’s office in Brooklyn said the office is reviewing the judge’s decision. John Gleeson, a lawyer for Lopez, didn’t respond to requests for comment from MLex. “Our client is grateful for the court’s well-reasoned decision,” said Carlos Ortiz, the attorney for Full Play, in an e-mailed statement.

After a seven-week trial, Lopez and Full Play had been found guilty of wire fraud and money laundering due to their alleged roles in a scheme to bribe South American soccer officials in exchange for the lucrative broadcast rights of regional club tournaments, World Cup qualifiers and other matches. Carlos Martinez, another former Fox executive and Lopez's onetime deputy, was acquitted of the charges he faced.

Central to Chen’s decision vacating the jury’s verdict against Lopez and Full Play was the application of two recent US Supreme Court decisions, both of which were made after their convictions, that had narrowed the government’s ability to apply fraud statutes to cover bribery schemes.

The Supreme Court decisions “rejected theories that had stood for decades in the Second Circuit,” law firm Mayer Brown LLP said in a May note to clients, “making clear that prosecutors may only use theories that … do not unduly expand the reach of federal criminal fraud statutes.”

In one of the decisions, Percoco v. United States, the Supreme Court found that the law against depriving another of the right to honest services “should not be held to reach an ill-defined category of circumstances” simply because of a smattering of older decisions. Rather, the law “must be defined with the clarity typical of criminal statutes,” the Supreme Court ruled.

Lopez had argued in a reply brief to his original post-trial motion for acquittal that, after the Supreme Court’s decisions in Percoco, and in Ciminelli v. United States, the court must find that the statute didn’t extend to foreign commercial bribery schemes. The judge agreed. The two Supreme Court decisions, and the absence of prior cases applying honest-services wire fraud to foreign commercial bribery, “requires this court to find that [the statute] doesn’t criminalize the conduct alleged in this case,” Chen ruled.

“Neither the parties nor the court have been able to identify a single … case applying honest services wire fraud to foreign commercial bribery,” Chen ruled. “This absence of authority, when viewed in light of the Supreme Court’s strongly worded rebukes in Percoco and Ciminelli against expanding the federal wire fraud statutes, compels this court to find that [the statute] does not apply to foreign commercial bribery.”

The judge also denied a government argument that the court should reject any distinction between foreign and domestic commercial bribery, as well as a claim that the wrongfulness of commercial bribery is self-evident based on bodies of law supporting an employer-employee fiduciary relationship.

“None of the government’s appeals to common law, state law, civil law, foreign law or codes of conduct, overcome the basic fact that there’s no precedential authority to support the application of this criminal statute, [the honest-services wire fraud law], to foreign commercial bribery, which the Supreme Court has now made clear in Percoco is required,” Chen ruled.

Chen ordered stays for all upcoming sentencings in the case until appellate review, if any, is completed. That included top soccer officials and others, such as Jeffrey Webb, the former head of the North American, Caribbean and Central American confederation; Aaron Davidson, an American sports marketing executive; and Luis Bedoya, the former head of Colombian soccer who had testified for the government in the trial of Lopez and Full Play.

“If the court’s judgement of acquittal is later reversed or vacated by the Second Circuit, it would presumably be on the ground that [the honest services wire fraud statute] does encompass foreign commercial bribery,” Chen ruled.

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